A Closer Look at How Bitcoin is Shaping the Meaning of Investment in the Modern World

2024-12-02T12:19:18.588+02:00

Monday, 02/12/2024 | 10:19 GMT by
FM

Platforms like VALR seem to be at the forefront of making crypto accessible & transparent.

Since its inception, Bitcoin has continued to challenge the financial status quo, offering investors all over the globe with an asset that goes against the traditional notions of value storage and investment.

Often referred to as “digital gold,” Bitcoin has transcended its initial perception as a speculative financial instrument — as evidenced by its remarkable performance in 2024. To elaborate, since the beginning of the year, the cryptocurrency has experienced a surge of 150%+, rising from approximately $62,000 to around $98,300.

Bitcoin’s key performance metrics (source: Coingecko)

This unprecedented growth stands in stark contrast to various traditional offerings. For instance, while the S&P 500 has witnessed a respectable growth of 26.24% and gold has grown by 26.84%, Bitcoin has outperformed them both by well over 100%.

Furthermore, over the last seven-year stretch, Bitcoin’s annualized returns have averaged around 44%, compared to a mere 5.7% for traditional equities and bonds. Not only that, barring its 2022 downturn, Bitcoin has delivered extraordinary returns of approximately 230% from 2011 to 2021, far exceeding the S&P 500’s annualized return of about 14% during the same period.

More decoupling action

The past year has marked a significant shift in Bitcoin’s market dynamics with the cryptocurrency’s relationship with traditional market indices becoming increasingly nuanced. To elaborate, Bitcoin and the Nasdaq Composite were found to move in tandem on only 52% of the year’s trading days, a sharp departure from the near-perfect correlation observed in 2021 and 2022.

If that wasn’t enough, since March 2024, their 30-day rolling correlation dropped to 0.46, one of the lowest levels in five years, briefly turning negative at -0.50.

Bitcoin vs Nasdaq correlation since 2020 (source: TradingView)

The maturation of Bitcoin as an asset class is further evidenced by its declining volatility. A Glassnode report recently revealed that Bitcoin’s implied volatility has significantly decreased, now sitting around 60%, down from over 100% in 2021.

Beyond the misconceptions

Over the last couple of years, Bitcoin’s position as a sophisticated asset with unique characteristics has garnered significant traction. As a result, investors all over the globe have been looking to incorporate BTC into their portfolios — understanding its potential as a hedge against inflation and economic instability.

Data from asset management giant Fidelity supports this perspective, showing Bitcoin as one of the best-performing asset classes when adjusted for risk, with its correlation to the S&P 500 dropping to just 19%.

Helming this transition towards crypto-based financial services is VALR, South Africa’s largest cryptocurrency exchange. Having processed over $10 billion in trading volume and serving more than a million users, the platform has become a pivotal player in making international digital asset transfers more accessible and efficient.

In addition, the exchange’s recent expansion into Poland and initial approval from Dubai’s Virtual Assets Regulatory Authority (VARA) have signaled the growing global acceptance of crypto-based financial solutions.

Lastly, thanks to its comprehensive product range — spanning spot trading, spot margin trading, perpetual futures trading — and innovative features like the world’s first bitcoin and USDT-perpetual futures pairs against the South African Rand, VALR has been able to secure $55 million in equity funding from reputable investors such as Coinbase Ventures, Pantera Capital, and Avon Ventures.

Bitcoin’s role in shaping national economic strategies

In a recent podcast between VALR CEO Farzam Ehsani and Anthony Scaramucci, founder of SkyBridge Capital, an intriguing discussion emerged about Bitcoin’s potential role in shaping the national economic outlook of the United States.

In this regard, Scaramucci expanded on Senator Cynthia Lummis’s stance that advocates for the U.S. to consider Bitcoin as a strategic reserve asset. He speculated that such a move could help offset America’s national debt, drawing parallels to gold reserves and positioning the U.S. as a leader in the digital economy.

Scaramucci then went on to acknowledge that while undoubtedly useful, Bitcoin alone wasn’t capable of solving the US debt crisis, highlighting its potential as a long-term strategic asset. The perspective aligned with the growing recognition of Bitcoin’s unique value proposition in the global financial ecosystem.

Looking ahead, the digital financial landscape is set to evolve at a rapid rate. Amid this maturation, platforms like VALR seem to be at the forefront of making cryptocurrency accessible, transparent, and integrated into mainstream financial strategies.

Bitcoin’s key performance metrics (source: Coingecko)

More decoupling action

If that wasn’t enough, since March 2024, their 30-day rolling correlation dropped to 0.46, one of the lowest levels in five years, briefly turning negative at -0.50.

Bitcoin vs Nasdaq correlation since 2020 (source: TradingView)